4 Trends Putting the “Value” Back in Value-Added Resellers

What Is a Value-Added Reseller?

A value-added reseller is a business that creates integrations, products, and features enhancing existing products or services. These companies then package the existing product/service with enhancements and resell the offering as a full-service solution. Value-added resellers often specialize in software, hardware, and other technologies.

If you're an IT reseller, value-added reseller (VAR), or channel partner advising clients on any part of the front office (marketing, sales, or customer success) -- especially for businesses under 1,000 employees -- there are a few trends you should be aware of.

Front-office SaaS development is booming, software is getting cheaper and more intuitive, and CEOs are concerned more about growth than point solutions. So, what does this mean for value-added resellers? I'll explain that, and more, below.

Four Software Trends IT Resellers, VARs, and Channel Partners Should Watch

Trend 1: Front-office SaaS development and spending is exploding

If you follow Chief Martec’s Scott Brinker, you already know the marketing technology landscape has seen explosive growth over the past ten years, growing from just 150 software businesses in 2011 to over 5,000 in 2017. But did you know this happening in sales technology now too?

Over the last three years, the number of sales technologies has grown from 300 in 2015 to 715 in 2017. And it’s not just happening across sales and marketing. SaaS spending across the entire business has grown between 75-100% each year for the past six years, according to Blissfully’s 2018 Annual SMB SaaS Trends Report.

Trend 2: Software is getting cheaper

The “freemium” model has been around forever (i.e., bars giving away salty snacks to sell more alcohol), but it has only recently been adopted by tech. The freemium debate has raged back and forth over the years as companies like Dropbox, Slack, MailChimp, and more have seen success with the model itself while more complex products have failed.

While freemium might not be the right strategy for every software business, 2015 saw approximately 22% of businesses adopting a freemium model. The world has shifted to a “try-before-you-buy” mindset. And that, coupled with freemium sales equaling a lower customer acquisition cost, makes it attractive to more businesses every year.

Trend 3: Software is getting more intuitive and requires less technical expertise

Software is getting immensely simpler to use. You don’t need to look too far back in time to see that software has evolved into a faster, more elegant, and more intuitive tool for non-technical end users.

Take this example from HubSpot’s own UI (user interface) in 2010 versus 2018.

HubSpot Landing Page UI, 2010

HubSpot Landing Page UI, 2018

Which page would you rather spend time on? The needs and expectations of users has grown as well. Mobile apps and free technology make it easy for users to engage with once-complex platforms and tools.

This is great, but it also means your offering must follow suit. In 2018, you can’t release a clunky UI that isn’t responsive on mobile. As user experience and interface improves, user expectations rise and tolerance for poor UX/UI reduces.

Trend 4: SMB CEOs care about growth, not point solutions

The lines between sales, marketing, and customer success are blurred. Today, SMB CEOs care about growth, plain and simple. They no longer consider marketing separate from sales and customer success.

And as these front-office software tools proliferate, CEOs no longer consider “front-office” separate from, “back-office.” They view the entire ecosystem and brainstorm ways to create a beautiful, powerful, end-to-end customer experience. This is why SMBs today need more than marketing automation. They need a growth stack.

What Does This Mean for Value-Added Resellers?

In a world where there’s a free, beautifully designed point solution for everything, the role of the value-added reseller must change.

Back-office spend has been shrinking since 2009, which suggests there’s more opportunity in the front office moving forward. You might have built your business on providing back-office solutions -- and I’m not suggesting you give that up entirely -- but transitioning some time to the front office represents a path towards sustainable growth.

The average SMB has more than 20 SaaS subscriptions across nine different categories and spends over $186,000 per year on those products. This is up from only about $10,000 per year in 2013, and it’s creating major efficiency issues for most businesses. For example, 60% of marketing teams spend 10% of their budget to integrate, maintain, and manage tools.

And, 72% of salespeople spend up to one hour every day on data entry and connecting records from different sales tools. At minimum, your opportunity lies in helping customers understand the proliferating technology landscape and selecting the right technology to fuel future growth.

The opportunity lies in helping customers eliminate some point solutions, integrate the remaining software, develop coherent business-wide reporting (With tools like Databox), and provide training and support to make it all work.

But there’s just one problem: It doesn’t create a scalable business. This brings me to the last big opportunity I see for businesses like yours today.

Offering front-office growth services is your next big opportunity

If you’re only offering services around technology selection, integration, reporting, and some basic training, you’ll struggle running a business with “lumpy” cash flow.

That’s because the nature of these traditional VAR services is project-based. You might win a consulting deal, do some work for three, six, or maybe even 12 months, but what happens after that? The client doesn’t need you anymore. They look at the hourly rate you’re charging for your work, decide you’re an opportunity to cut cost, and part ways.

But what if you didn’t have to replace your entire client base? What if you shifted from being a project-based, cost-center consulting firm to an ongoing, strategic partner driving revenue and profit for your clients? It would change the trajectory of your business, right?

This is the next frontier for businesses like yours, but it doesn’t come without investment in training to learn the types of services you could be providing to clients.

Done well, this means your business can transition away from $25-$50K one-time consulting projects that aren’t in step with many of today’s SMBs and into long-term, recurring value-added service engagements worth $50-$100K+ per year.

Then, you’ve got to deliver. Provide these services well -- all of them -- and you’ll save clients from hiring an army of full-time employees.

Want to learn more about how my team and I help businesses like yours make this transition, reach out to us directly (salespartners@hubspot.com) or click the banner below.

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